WEAKNESSES

Non-inclusive growth and high unemployment, especially among young people

Restricted formal economy

RISK ASSESSMENT

Dynamic growth dependent on natural resources

Activity should pick up in 2017. Growth should be underpinned by increased fish sector production (reinforced by a 4-year agreement reached with the EU in 2016) which will partly offset the slowdown in the manufacturing and mining sectors. Despite the decline in manufacturing output, the secondary sector is also central and is likely to be boosted by construction and civil engineering, as part of a investment plan. The mining sector, dominated by copper production as well as iron ore, will continue to suffer weak foreign demand and from the lack of any upturn in the prices for these raw materials, despite an expected increase in output with the start of operations at the Guelb II iron ore mine. The financial and retail sectors should continue to grow, boosted by domestic consumption that is being stimulated by increased use of consumer credit.

Inflation is expected to increase in 2017 as a result of slightly higher prices for food stuffs and the depreciation of the Mauritanian currency.

Economy vulnerable to external shocks

Despite its vigorous growth, the Mauritanian economy remains vulnerable to external shocks. This is because of its heavy reliance on mineral exports that make up most of its overseas sales. The balance of trade is thus likely to struggle with the worsening in the terms of trade due to the fall in mineral prices and waning demand in China. The deterioration in the current account balance will be further exacerbated by the reduction in current account transfers and revenues.

The budget deficit, after improving in 2016 thanks to improved management of the tax collection, is likely to widen in 2017 because of the collapse in non-tax revenues, mainly associated with declining revenues from the mining and oil and gas sectors.

In this context, the public debt will remain at a high level despite the debt relief granted to the country. The country is heavily indebted to the Kuwaiti sovereign fund (Kuwait Investment Authority) and debt reduction talks are ongoing with Kuwait.

The public debt is mainly external and contracted by the State. 90% of the external debt stock is denominated in foreign currencies (mainly Kuwaiti dinars and US dollars). The ouguiya has lost around 13% of its value against these two currencies since January 2016. Faced with such pressure on its currency, there is a possibility that the authorities will apply a larger devaluation.

The political situation is calmer but the security situation remains precarious

On 21 June 2014, Mohamed Ould Abdel Aziz was re-elected President for five years, with 82% of the votes, in an election boycotted by the leading opposition parties. The Constitutional Council confirmed the result, which has allowed the President to consolidate his legitimacy after the 2008 coup d’état. However, with the high levels of poverty (50%) and unemployment (estimated at 31% in 2015), the risk of social unrest remains significant, further fuelled by an inequitable distribution of resources.

Among the key challenges is that of slavery: It is estimated that in 2014 the number of slaves was in excess of 150,000, i.e. 4% of the population of Mauritania. As of 13 August 2015, a new law increased the penalties for those involved in slavery. It includes courts to deal with crimes of enslavement. In addition, Mauritania is in a fragile geopolitical situation. Security remains a critical challenge for the country, given the presence of terrorists groups in the Sahara, such as Al-Qaida in the Islamic Maghreb (AQMI). These terrorist cells, active in the Mauritanian territory, represent the greatest threat to the internal stability of the country. With the aim of preventing their return to its territory, at the beginning of 2014 Mauritania launched a security cooperation structure known as “G5 du Sahel”. In this context, the business climate in Mauritania is difficult, reflecting the lack of financial and banking infrastructure and the level of corruption. The business climate has however improved in 2016. According to the 2017 Doing Business survey, Mauritania rose from rank 165th to 160th (among 190 countries). The government is thus hoping to consolidate these gains with the continued application of the strategies implemented in 2015 and 2016.